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How much money can I put into my IRA or employer-sponsored retirement plan?

IRAs and employer-sponsored retirement plans are subject to annual contribution limits set by the federal government. The limits are adjusted periodically to compensate for inflation and increases in the cost of living.

IRAs

For tax year 2020, you can contribute up to $6,000 to all IRAs combined (the limit is adjusted annually for inflation) which is unchanged from 2019. If you have a traditional IRA as well as a Roth IRA, you can only contribute a total of the annual limit in one year, not the annual limit to each.

If you are age 50 or older, you can also make a $1,000 annual “catch-up” contribution.

Employer-sponsored retirement plans

Employer-sponsored retirement plans such as 401(k)s and 403(b)s have a $19,500 contribution limit in 2020 (a cost-of-living increase of $500 from 2019); individuals aged 50 and older can contribute an extra $6,500 each year as a catch-up contribution (a cost-of-living increase of $500 from 2019). (Section 403(b) and 457(b) plans may also provide special catch-up opportunities.)

SIMPLE plans

You can contribute up to $13,500 to a SIMPLE IRA or SIMPLE 401(k) plan in 2020 (a cost-of-living increase of $500 from 2019), and an extra $3,000 catch-up contribution if you are age 50 or older (unchanged from 2019).

Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income, except for any after-tax contributions you've made, and the taxable portion may be subject to 10% federal income tax penalty if taken prior to reaching age 59½ (unless an exception applies). If you participate in both a traditional IRA and an employer-sponsored plan, your IRA contributions may or may not be tax deductible, depending on your adjusted gross income.

IMPORTANT CONSUMER INFORMATIOn:

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

* Securities offered through Woodbury Financial Services, Inc., (WFS), memberFINRA/SIPC. WFS is separately owned and other entities and/or marketing names, products or services referenced here are independent of WFS. Insurance services are offered through Financial Strategies of Wisconsin, LLC, which is not affiliated with Woodbury Financial Services. Neither Woodbury Financial Services, Inc., nor its registered representatives or employees, provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice. This website contains content and links to third-party resources. Woodbury Financial Services, Inc. or its affiliates do not endorse or accept responsibility of third-party content.

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